Financial Amnesia

The House voted for a 1600+ page spending bill which would provide funding for most government operations through this time next year. One catch was that funding for Home Land Security was limited to two more months.

Far more consequential were the provisions increasing allowable campaign contributions and the repeal of a certain provision of the Dodd-Frank bill. Could this be a blueprint for how politics will be conducted next year when the GOP controls Congress?

While the increase in what an individual donor can contribute seems like pouring gasoline on an open fire, most likely this provision is more like using ones left hand or ones right hand to stoke the fire. There is already ample methods for funding political campaigns with ridiculous amounts of $$$. Winners are clearly the cottage industry set up around elections.

The Dodd-Frank issue is much more problematic. Big banking has grown so large and sophisticated that the notion that behind each new business or home owner stands a caring banker is a thing of the past.

For big banking, the commercial side of their business is a necessary nuisance. If big banks could acquire unlimited funds at low enough interest rates, they would dispense with checking and savings accounts and close their small business loan departments. Big banks are in the business of making big money. So what’s the problem?

The Dodd-Frank provision prevented banks from trading “account holders'” FDIC insured deposits for bank profits. Banks were still free to trade using their own money but not yours and mine.

As a consequences, banks could only undertake risky trades with retained profits. For most people this was how the banking system was suppose to work.

Congress’ action now allows banks to trade using FDIC insured funds just as they could when foolish derivative trading lead to the near worldwide economy collapse. Maybe nothing will go wrong. Banks may have learned their lessons. Hmmm. Got any bridges for sale?

An omnibus spending bill is no place for either of these two provisions. Both changes should have been debated in sunlight and dealt with as separate bills. But that is for another day.

The House’s action involve political compromise overall. This provision may smell to the noses of those who favor bank regulations but other parts of the spending bill were just as abhorrent to other members.

It is just hard to believe that tax payers around the country had written their Congress members demanding Big Bank relief from Dodd-Frank. I wonder who pushed for these changes?